There are very few things that are more difficult to talk about than death and divorce. However, Covid-19 has shone some light on the need to have these conversations so that you manage how these major life events influence your finances and estate planning.
Failing to do so can lead to unwanted red tape and make an already difficult transition even harder.
Drawing up a Will is an important part of your estate planning. Having a Will in place ensures that your wishes are explicit and that your loved ones are cared for. It ensures your family’s wellbeing when you are no longer around to provide for them.
Many people do not realise the impact of a divorce on this essential document.
History has shown us that divorce rates spike after major world events. In the US there was an unprecedented spike in divorce after World War 2 and research in the United Kingdom showed that there was a 5% increase in divorce rates after the global recession.
According to a 2018 report by Statistics SA only about four in 10 South African marriages make it to their 10th year. There were 25,284 completed divorces in South Africa in 2018 and trends in the report show that although the total number of divorces decreased from 2009 to 2011, this was followed by a consistent increase in the years 2012 to 2017.
Experts expect that we will see a similar trend because of the Covid-19 pandemic.
In China officials have already reported a spike in divorce applications attributed to a lag caused by law firms being closed and exacerbated by couples being quarantined together for an extended period in an inflammatory environment.
In South Africa there is anecdotal evidence from lawyers who have seen an increase in divorce applications with one law firm reporting a 20% spike in the divorce rate during level 4 of the lockdown.
But how can getting divorced affect your estate when you die?
In South Africa it is accepted under law that a marriage is in community of property, which means your entire estate is shared 50/50 – so each spouse owns half of the other’s assets, unless a specific antenuptial agreement is in place. Add to this the fact that that 80% of South Africans die without having a proper Will in place and you can see why this is often a contentious issue.
Section 2B of the Wills Act sets out that former divorced spouses intend to disinherit each other unless a contrary intention appears from the Will. This assumption is valid for three months from the date of the divorce and allows spouses suffering from the trauma of divorce a three-month grace period to amend their Wills. After the three-month period, it would be accepted that your intention remains that your former spouse should inherit which is why it is so important that you amend your Will after a divorce.
So, if you die within the three-month grace period and have not changed your Will the Wills Act determines that you have disinherited your former spouse. However, if you die after the three-month grace period your Will, will be valid and your former spouse will inherit. If you intend leaving something to your former spouse, it is advisable that you still amend your Will to stipulate that this is the case.
It is also advisable to address all alimony and maintenance claims in your Will as these obligations do not necessarily cease on your death. If you do not make provision for this in your new Will your former spouse could institute a lumpsum claim against your estate to cover these maintenance obligations when you die. The creation of a testamentary trust can serve as a vehicle to hold assets while servicing maintenance obligations.
Getting remarried adds an additional layer of complexity, especially if your second marriage is in community of property. What this could mean is that if you have not amended your Will and you die after the three month grace period your original Will remains valid and your former spouse will inherit your half of your joint estate which, in this case, would include a half share in the assets belonging to your new spouse.
If you are not married in community of property to your new spouse and failed to amend your Will before passing your former spouse will have rights to your assets only. While your current spouse will not inherit assets from you in terms of your Will, he or she can claim in terms of the Maintenance of the Surviving Spouses Act.
The absence of a Will is not the only time that this scenario could play out. It could also occur when a Will is not executed correctly and as a result the devolution of the estate is in question.
For your Will to be valid you must sign every page of the Will and it must witnessed by two independent witnesses. They cannot be beneficiaries or spouses of beneficiaries in terms of your Will and they must both be present with the testator at the same time and at the signing of the Will. Witnesses must be over the age of 14. Finally, the Will must be drafted correctly and must use the correct terminology.
Unfortunately, divorce is seldom amicable. When it comes to your estate you should treat divorce like any life-changing event. Make sure you review your Will, as well as your group life, pension, and your life policies. Reviewing your Will and making the required changes regularly, will remove ambiguity around your final wishes after you pass on and put you in the position to protect your loved ones’ livelihoods after you are gone.
Tony Hakime Senior Manager at Standard Trust Limited